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Digital Systems and New Challenges of

Financial Management – FinTech, XBRL,
Blockchain and Cryptocurrencies
Mosteanu, N. R. & Faccia, A.

Published PDF deposited in Coventry University’s Repository

Original citation:
Mosteanu, NR & Faccia, A 2020, 'Digital Systems and New Challenges of Financial
Management – FinTech, XBRL, Blockchain and Cryptocurrencies', Journal of Management
Systems - Quality Access to success , vol. 21, no. 174, pp. 159-166.
https://dx.doi.org/

ISSN 1582-2559
ESSN 2668-4861

Publisher: SRAC - Societatea Romana Pentru Asigurarea Calitatii

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 INFORMATION SECURITY MANAGEMENT

Digital Systems and New Challenges of Financial Management –

FinTech, XBRL, Blockchain and Cryptocurrencies

Narcisa Roxana MOSTEANU 1, Alessio FACCIA 2

1 Corresponding author, Professor Dr. at American University of Malta, Malta; E-mail: [email protected]
2 Dr. Lecturer, Coventry University, UK; E-mail: [email protected]

Abstract

Management of public finance and economic development is the art by which a nation improves the economic,
political and social well-being of its people. The research paper starts from the reality that finance plays an important
role in each economy. Nowadays, finance has to manage and adapt to Digital Era. The purpose of this paper is an
attempt to identify and encourage managing financial statements through artificial intelligence using XBRL and
Blockchain. In many countries, financial and tax authorities encourage the adoption of eXtensible Business Reporting
Language (XBRL) and Blockchain. XBRL enable business to generate their required reporting information directly
from their financial data. Blockchain technology continues to grow and it is being used in more and more business
sectors. Finance, accounting and auditing has been identified as areas that could greatly benefit the distributed
registry and other features of Blockchain. The main benefits generated by these innovative tools include reducing the
risk of error (especially human error); low risk of fraud; system automation, big data analysis, huge cost savings (by
increasing the efficiency and decreasing in errors), increased reliability in financial reports, and reduced workflow. The
research paper comes to present how artificial intelligence combine financial information with tech capabilities,
accelerate digital transformation of finance and accounting, and may create a more safety business and economic
environment, reducing human error. We have to manage our work and time differently. We are living in a digital and
intelligent era, where machines take over repetitive, time-consuming and redundant tasks, giving finance
professionals more time to approach higher level and more lucrative analysis and research.

Keywords: management of finance; artificial intelligence; XBRL, Blockchain; digital finance; error reduction.

1. Introduction coming from implementation of artificial intelligence or digital

systems.
The internationalization of financial markets is having The changing world affects the economic development,
profound effects on all countries. Foreign investors and taking different meanings and techniques. We are hearing about
international bodies provide funds to corporations in certain the presence of artificial intelligence in all economic sectors, and
countries, helping finance existing businesses, open new ones it already part of our day-to-day life, in one way or another. The
or helping the government (by investing in Treasury or research paper comes to present how artificial intelligence com-
municipality bonds). Without these foreign flows of funds, the bine financial information with tech capabilities, it accelerates
economies would have grown far less rapidly in the past 20 digital transformation of finance and accounting, and it may
years. The internationalization of financial markets is also create a safer business and economic environment, reducing
leading the way to a more integrated world economy in which human error. Artificial intelligence is an aptitude demonstrated
flows of goods and technology between countries are more by machines, in contrast to the natural intelligence displayed by
commonplace (Greenbaum, et al., 2016). Internationalization of humans and other animals. Using the most innovative tech-
financial markets brought many benefit to investors and nologies, we can find new business solutions and solve
countries in the same time. International financial facilitates problems that until now seem hard to fix. Artificial intelligence,
trade, risk management improvement, mobilizes resources, and through knowledge management, links machines, IT, new tech-
acquires and processes information that helps in the allocation nologies and businesses. No matter the economic sector, the
of capital. size and the geographical location, all business are still facing
Informatization and computerization of society is one of the the same issue: preparation of financial statement, accounting
most important processes of present, everywhere around the bookkeeping compliance with international GAAPs, human
world. Opportunities for new activities open up, while the error, and an accurate comparison financial analyse. Artificial
information and technological environment as such contains the intelligence comes to bring digital solutions: eXtensible
potential danger of deformations in the structure of personality Business Reporting Language (XBRL) and Blockchain.
and the ways of its social integration. In this regard, there is Investments through financial capital infusion, lead to increase
reason to assume that the development of information of production, consumption, and income in private, and public
technologies in our modern age has both constructive and sector (Moşteanu, AlGhaddaf, 2019). Therefore, according to
deconstructive consequences for a person or for a business the Government’s requirements, we need a standardized tool to
(Lokova, et al., 2018). Management of finance faces new risks submit all the financial accounting reports required by law –

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XBRL. The most developed countries (from Europe, Middle East done in real time, using a simple application on the phone.
and USA) are already using XBRL in their financial statements. Glasses can be connected directly to google map or other
search program. All of these are already part of our lives.
Artificial Intelligence solutions have the potential to transform
2. Literature review – Digital finance – such diverse and critical areas as education, research, health-
the base for XBRL and Blockchain care, finance, accounting, auditing, transport and energy. It is
not a single technology but a family of technologies. In addition,
2.1. Digital-Financial Markets – FinTech Artificial Intelligence solutions can help sustainable, rapid and
viable regional development. The regional economic disparities
The most valuable derivative of digitization is the rich pool of that exist in different areas of the world can be diminished consi-
gathered data, which is growing very fast. Advanced computing derably. Therefore, Artificial Intelligence can help to successfully
capability has paved the way for big data analytics. Social implement regional development policy objectives (Moşteanu,
media, mobile, analytics and cloud (SMAC) and application 2019), regardless the geographical area, the spoken language
program interface (API) technologies have allowed different or the sectors of predominant activity. In many countries/regions
data streams to talk to each other in a highly efficient manner. public authorities require the application of the XBRL to enhance
This has led to the integration of multiple services into a single business operations and transparency, with the aim to advance
platform, thus creating a plethora of cases for digital financial their market’s standing in the eyes of investors.
services – fueling the app economy (Economic Corporate The history of Artificial Intelligence started around 100 years
Network, 2016). ago, in 1920, when Czech writer Karel Čapek published a
To remain competitive and achieve longevity in the market, science-fiction piece called Rossumovi Universal Robots, which
financial services has to keep up with digital transformation. The introduced the word robot, a humanoid machine which work for
survival of financial institutions is connected with the adoption of people (Turing, 1950). In 1950, Alan Turing (mathematician,
innovation, and embracing digital changes, to improve the effi- computer scientist, logician and cryptanalyst) asked himself
ciency and the performance within the organization (Scardovi, (publically) Can machines think? (Koistinen, 2016), and from
2017). Digital transformation and new technology adoption have this question the Artificial Intelligence started its journey. Turing
changed the way of doing business and channels that offer continued to develop three distinct strategies that might be
banking and financial products and services are more intuitive considered capable of reaching a thinking machine: through
and trustworthy (Mohamed, Ali, 2019). programming; ab initio of machine learning (Koistinen, 2016);
Digital systems are becoming more and more used, and, knowledge management (using logic, probabilities, lear-
representing a much faster, cheaper and safer way when it ning skills). As a result of discoveries in neurology, information
comes to financial transactions. Access to modern telecommuni- theory and cybernetics in the same time, researches, and with
cations systems is a priority in all countries around the world, as them Alan Turing, created the idea that it is possible to build an
in their evolution, financial and banking systems implement, use electronic brain. Turing introduced his widely known Turing Test,
and encourage online services for domestic and international which was an attempt to define machines’ intelligence. The idea
financial transfers. Digitization and digital transformation have behind the test was to call machines (e.g. a computer) intelli-
become the most commonly used words in the last decade, but gent. If a machine (A) and a person (B) communicate through
especially in recent years. There is an excess of definitions of natural language and a second person (C), a so-called elevator,
this term, used to describe the offline-to-online migration of cannot detect which communicator (A or B) is the machine
commercial operations and businesses, including those found in (Schultebraucks, 2018). And the research continued. On 11 May
many published research works. Contemporaneous economists 1997 IBM’s chess computer defeated Garry Kasparov after six
defined digitalization as the realignment of, or new investment games. In the last two decades, Artificial intelligence has grown
in, advanced technology and business models to more effecti- heavily. The Artificial Intelligent market (hardware and software)
vely engage digital customers at every touchpoint in the customer has reached $9 billion in 2018 and the research firm IDC
experience lifecycle (Solis, Littleton, 2017). (International Data Corporation) predicts that the market will be
Financial technology – FinTech refers to an emerging $47 billion by 2020. This all is possible through knowledge
financial services sector that is becoming increasingly indis- management to explore Big Data, and take advantage of faster
pensable to financial institutions and has a steady impact on computers and advancements in machine learning techniques
how technology supports or allows banking and financial servi- (Schultebraucks, 2018).
ces. Fintech, Financial Technology targets construction systems
that model, value and process financial products, such as 2.3. eXtensible Business Reporting Language
shares, bonds, money and contracts. Contemporary economists (XBRL)
define Fintech as a new financial industry that applies tech-
nology to improve financial activities (Schueffel, 2016). Currently eXtensible Business Reporting Language – XBRL – is a
financial technologies are used by all types of business, from language used for electronic communication of business and
start-up to large corporations, in all economic sectors. financial data, which is revolutionizing business reporting around
the world. XBRL enable business to generate their required
2.2. Artificial Intelligence reporting information directly from their financial data. It is a
consistent tool also useful for comparability and overall business
The digital revolution is changing the way of living, working evaluation.
and communicating. The transformation, that takes place within The birth of modern accounting had its origins in the Italian
the telecommunications industry, it has a great impact on the Renaissance where the favorable climate existed for double
surrounding world with the emergence and continued improve- entry bookkeeping to be developed. In 1458, Luca Pacioli wrote
ment of digital technologies (Zhao, 2018). Artificial Intelligence is his fifth book, Summa de Arithmetica, Geometria, Proportioni et
one of them. It is a recent technological breakthrough, which, Proportionalita (Everything about Arithmetic, Geometry and
combined with industrial technology, it helps overcoming many Proportions). This was the first book on Algebra and it is the first
human errors, exceeding human performance in different areas. systematic documented source of double entry bookkeeping
IT programs are becoming more accurate, detecting and scaling method. Its basics are familiar and similar in the modern
objects better than human performance. Speech recognition accounting system, but the rules of accounting have been
systems can now identify the language of telephone calls and developed over the years, especially in the last 40 years. Now
voice recordings with levels of accuracy that match human the accounting rulebook has expanded to over 4,000 pages, and
abilities. Translating from one language into another is now is perpetually changing to accommodate new business

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practices. The use of a standardized coding structure, such as important information by using cryptographic techniques is
XBRL would help to reduce these wage expenses by removing considered older, as the term crypto is taken from an ancient
the replication of data-entry over many channels, and reducing Greek word Kryptos, which means hidden. World Bank classi-
lost data costs. In 2000, an accounting industry specific lan- fied cryptocurrencies as a subset of digital currencies, which it
guage was released, this was version 1.0 and it was renamed defines as digital representations of value that are denominated
the eXtensible Business Reporting Language, what we called in their own unit of account, distinct from e-money, which is
now XBRL (Kloeden, 2006). In 1999, the American Institute of simply a digital payment mechanism, representing and denomi-
Certified Public Accountants, six information technology compa- nated in fiat money. In contrast to most other policy makers, the
nies, and experts reported that they had joined forces in an World Bank has also defined cryptocurrencies itself as digital
attempt to develop an XML-based Financial Reporting Lan- currencies that rely on cryptographic techniques to achieve
guage and extend XBRL internationally for use in business consensus. Today, the advent of cryptocurrencies is traced to
reporting. If the father of accounting is Luca Pacioli, the fathers the emergence of the first cryptocurrency, that is, bitcoin in 2009.
of XBRL are Charles Hoffman and Wayne Harding (Hoffman, After the emergence of bitcoin in 2009, the experiments in
Strand, 2001). The American Institute of Certified Public cryptocurrencies started happening in 2011 with the release of
Accountants was receptive to this idea and funded the creation SolidCoin, iXcoin, Namecoin, and others. As of August 1, 2018,
of a prototype, once a plan was presented. When the prototype there are more than 1,737 different cryptocurrencies in the
was finished, the AICPA created and promoted XBRL Inter- market. This number of cryptocurrencies breaks down into 819
national. The group was formed as a not-for-profit global coins and 918 tokens. According to CoinMarketCap data, the
consortium of companies and agencies with one common goal, combined market of overall cryptocurrencies to date is valued at
the development of XBRL and the widespread acceptance and $269 billion (Mohamed, Ali, 2019).
use of the new global coding standardization process for finan- Central banks have started to consider whether they might
cial information (Tie, 2005). Currently, XBRL is used by more issue digital currencies of their own. Due to the advent of
than 100 regulators in over 60 countries (Europe, Middle East cryptocurrencies and blockchain technology, the central banks
and Asia, North and South of America), supported by over 200 of major economies started to think and work on their own
software packages and a growing number of companies, to Central Bank’s Digital Currency (CBDC) (Mohamed, Ali, 2019).
facilitate structured data reporting across millions of companies A fundamental matter raised by CBDC issuance relates to the
(Nitchman, 2016). appropriate roles – in financial intermediation and the economy
at large – of private financial market participants, governments
2.4. Blockchain and central banks. With CBDCs, there could be a larger role for
central banks in financial intermediation. As the demand for
Blockchain is another newest technology, which enable CBDC grows, and if holdings of cash do not decline in lockstep,
businesses to generate their required reporting information central banks might need to acquire (or accept as collateral)
directly from their financial data. Blockchain technology additional sovereign claims and, depending on size, private
continues to grow and it is being used in more and more assets (e.g. securitized mortgages, exchange-traded funds and
business sectors, finance, accounting and auditing has been others). If demand becomes very large, central banks may need
identified as areas that could greatly benefit the distributed to hold less liquid and riskier securities, thereby influencing the
registry and other features of this one. prices of such securities and potentially affecting market
Blockchain is a new technology that was introduced a functioning. Central banks may also need to provide substantial
decade ago, after financial crisis of 2008 (Nakamoto, 2008), and maturity, liquidity and credit risk transformation at times to both
there is still a long way to be accepted and adopted by banks and markets. Since central banks could assume more
everyone. Blockchain can be described as the chronological important roles, they could have a larger impact on lending and
record of block transactions. To ensure transactions, the financial conditions (Committee on Payments and Market
cryptography is used, based on a chain of digital signatures. Infrastructures, 2018).
Each block is a group of transactions that are added to the last
block by reaching a consensus on its authenticity among users,
which is then passed to each network user to update their 3. Research Methodology
database. The Blockchain system records all transactions ever
made, shared by consensus distributed and shared among each The present work paper is an exploratory research, based
participant’s users, and it is very difficult to force it. Since every on investigative techniques. It is a fundamental and qualitative
two-key sign-in and any transactions are cryptographed and research, which aims to identify and encourage managing new
simultaneously maintained in distributed ledgers of each Node, financial methods through artificial intelligence and digital systems
which make this almost impossible to be hacked. Nowadays to achieve an efficient sustainable economic development. The
double-entry bookkeeping it is not an absolute system but it is paper present the new approach of finance and the necessity to
logically extendible to triple-bookkeeping by including a set of review and adapt the management and supervision of financial
force in its third axis (Yuji, 1982, 1986). In the accounting institutions, markets and their services provided. The research
industry, Blockchain helps the companies to write their tran- paper comes to present how artificial intelligence combine
sactions directly into a join bookkeeping, creating an interlocking financial information with tech capabilities, accelerate digital
system of enduring accounting records. Double entry accoun- transformation of finance to create a more safety business and
ting has been used for a very long time now. Triple entry economic environment, reducing human error.
accounting adds a level of clarity and honesty to bookkeeping
that double-entry accounting cannot offer (Faccia, Moşteanu,
2019). 4. Findings and Conclusions
2.5. Cryptocurrencies 4.1. New compulsory financial statements
submission forms
As digital finance and artificial intelligence occupy an in-
creasingly important place in the financial services market over The convergence of the IFRSs and US GAAPs accounting
the last decade, cryptocurrencies appear too. Cryptocurrencies standards allows a uniformity in the presentation of the financial
are virtual digital currencies and named as such because statements in every part of the world. The business strongly
cryptographic techniques lie at the heart of their implementation requires that information to be relevant, reliable, comparable
(He et al., 2016). Historically, the idea and concept of storing and timely. These essentials appear even more evident if we

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take into account the increasing complexity and details required and statement of changes in equity. Furthermore, XBRL lan-
by the accounting principles themselves. Implementation of guage now also concerns the descriptive notes of the financial
accounting principles and of knowledge management to perform statements, limiting the freedom of company directors in drafting
it, is changing the accounting practices. In the twentieth century this annex. However, the taxonomy as regards the notes of the
the accountants’ salary was considered as the main cost of an financial statement, provides a rigidity only in relation to the list
accounting department. Accountants had to spend a lot of time of paragraphs to be included. The editor of the financial sta-
entering an ever-increasing amount of data in the accounting tement is then free to add comments, to include further detail in
books (journal and ledger), initially papery, then computerized, each paragraphs or to specify within the mandatory paragraphs
since the 90s. that some paragraphs are not inherent and should not be
Since the end of the 1990s, accounting information systems drafted. The accounting and financial systems are continuously
(Amat, Amat, 2019) are becoming increasingly used in accoun- updated. Here is how, in 2019 there is another update in the US
ting departments, favoring time-loss in data entry, reducing errors, GAAP Financial Reporting Taxonomy. This one contains mainly
improving the statement processing time (almost immediate) updates for accounting standards. It includes amendments for
and procedures (adjusting entries), allowing an integration with the SEC’s authoritative literature in which the underlying recog-
cost accounting (Astuty, 2019), and thus, obtaining a high de- nition and measurement are not specified by GAAP, but
gree of detail (previously unthinkable). The skills requirements in implemented by XBRL codification anyway (https://xbrl.us/home
accounting departments are rapidly changing, moving towards /filers/sec-reporting/taxonomies/). The latest update for IFRS
information technology rather than accounting. However, the (International Financial Reporting Standards) Taxonomy it was
costs of keeping the accounts have not decreased. New costs in 2018. It was required to markup electronic IFRS financial
occurs: accounting software licenses (in particular ERP soft- statements. By providing the IFRS Taxonomy, the International
ware), which have become essential, and it is increasing expo- Accounting Standards Board can ensure that the taxonomy
nentially. In the present time, the number of accountants is being used is an accurate representation of International Financial
reduced, companies are looking now for fewer but more Reporting Standards (IFRS Standards) (https://xbrl.us/home/
qualified employees (Richards et al., 2019). Accountants must filers/sec-reporting/taxonomies/).
be able to use accounting information systems perfectly and
must also be able to customize them. IT knowledge is therefore 4.2. Impact of XBRL on financial analysis
now undoubtedly essential. Knowledge management (O’Leary, and audit effectiveness
2018) in accounting departments is increasingly oriented to-
wards the integration of IT systems with financial, accounting XBRL is a technology that allows object tracking. It is based
and legal skills. The main challenge is to create teams of people on XML (Extensible Markup Language), that is a metalanguage,
able to understand and apply transversal knowledge, capable to or a marker language based on a syntactic mechanism that
reason in terms of flow chart, in order to communicate with a allows to define and control the meaning of the elements
single common denominator and expressing each other’s work contained in a document or in a text. The World Wide Web
needs. The positive combination between IT and accounting is Consortium (W3C) (Clark, deRose, 2017; Cole et al., 2016),
allowing an increasingly timely and reliable disclosure, which is following the browser war (the situation occurred in the nineties
leading to a uniformity of exposure. It is better that, standard in which Microsoft and Netscape introduced, with each new
setters, tax authorities and legislators should constantly interact version of their browser, an extension that is proprietary to the
with the software houses. This will the coordination between official HTML), was forced to follow the individual extensions to
practice and laws, to face accounting systems challenging. the HTML language. The W3C had to choose which features to
Financial statements represent a crucial disclosure of the syn- standardize and which to leave out of official HTML
thesis, not only among accounting, legal and fiscal rules, but specifications. It was in this context that the need for a markup
also among these rules and the constraints and opportunities of language that gave more freedom in tagging, while remaining in
information technology. This challenge is faced not only by a standard, began to emerge. The “XML project”, which began
standard setters, tax authorities and legislators, but also by at the end of the nineties in the SGML Activity of W3C, aroused
accounting practitioners, developers of business reporting, IT so much interest that W3C created a working group, called the
professionals, auditors, executives, bureaucrats, academics, XML Working Group, composed of world experts in SGML
students, politicians and government ministers. technologies, and a commission, the XML Editorial Review
The information summarized by the financial statement (as Board, responsible for drafting the project specifications. In
this is a document on which all stakeholders rely), is better to be February 1998, the specifications became an official reco-
collected, synthesized, transmitted and analyzed with incredible mmendation with the name of Extensible Mark-up Language,
rapidity and accuracy (Ramin, Reiman, 2013). Since XBRL is a version 1.0. Soon we realized that XML was not limited to the
language that can be used by companies to fulfill legal and web context but it was something more: an instrument that
accounting obligations, this is an open source technology that allowed to be used in the most diverse contexts, from the
contains standard tags, but it allows the tracking of objects in definition of the document structure, to the exchange of infor-
order to perform different types of analysis. mation between different systems, from the representation of
XBRL is not a software itself, it is a standardized language images to the definition of data formats. Compared to HTML,
program, usable by software houses to create and customize XML has a very different purpose: while the former defines a
specific software for its customers. In general, free user-friendly grammar for the description and formatting of web pages (layouts)
versions are also available and provided by governments, to and, in general, hypertexts, the second is a metalanguage used
allow all companies, in any case, to prepare and send financial to create new languages, suitable for describing structured
statements. Even if there is a need and a tendency towards documents. While HTML has a well-defined and restricted set of
uniformity, in particular to comply with the requirements of the tags, with XML it is instead possible to define its own according
most widespread international accounting standards, IFRS and to the needs. XML is nowadays also widely used as a means of
US GAAP, there are various XBRL taxonomies, which are con- exporting data between different DBMSs (Database Manage-
stantly updated and released on an annual basis. Each country ment Systems). The use in the configuration files of applications
is better to try to customize taxonomies to take into conside- and operating systems is widespread. XML, like HTML, uses
ration the translation in different languages. Initially the XBRL markers in its programming. These markers are called tags
taxonomy included only the numerical schemes of the financial (labels), to assign a semantics to the text. Tags can contain
statement: statement of financial position (balance sheet), state- information in two ways: through parameters or by enclosing text
ment of comprehensive income (income statement or profit and or other types of information. It follows that they can be opening
loss statement), statement of cash flows (funds flow statement), tags, necessarily followed by closing tags (among which you can

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have a content) or tags that open and close, and can therefore participants themselves to the Blockchain, through an authen-
provide information only through their parameters. Each label tication system. In addition, every transaction stored in the chain
starts and ends with angle brackets <> (which in other contexts cannot be deleted or modified, and can be consulted at any time
would be the minor and major signs), while the closing of the tag by members of the network. The transactions to which
or the closing tag is represented by the / bar. The advantages of Blockchain technology can be applied are, ideally, all those
XML can be summarized in one word: SPEED. Speed is above involving the following subjects: payments, management of
all the main reason that drives many companies to switch to e- information linked to contracts (such as smart contracts), and
commerce: faster response to customer needs, faster publishing transactions involving the exchange of goods and services and
of direct information to customers and supply chain partners; many others. All the business sectors may be potentially
faster processing of orders received via the Internet. SPEED is affected (from banking to insurance, from energy to healthcare,
also an acronym that lists the main advantages of XML: Storing, without excluding the telecommunications one). The Blockchain
Publishing and Exchanging Electronic Documents. XBRL, in phenomenon, although it arouses a certain enthusiasm thanks
particular, is the language based on XML programming used for to the multiple benefits it brings to both individuals and busi-
communication and the exchange of financial and accounting nesses, is not exempt from arousing even some concerns.
data in electronic format (Radu, 2016; Santos, et al., 2016; However, it is expected that it will allow a safer and faster
Wang, Wang, 2018; Blankespoor, 2019). transmission flow of data and information, while the creation of
The legislation on auditing and the auditing standards do not databases with the same characteristics of the ledgers, it will
provide for the auditor new controls with reference to the codi- allow a simplification and speeding up of the necessary pro-
fication of the financial statements compliant with XBRL format. cesses, for example, for the assessment and the payment of
Therefore, the auditor must not carry out specific checks on the taxes. Its main characteristic, the decentralization, allows the
XBRL format and on submitting the financial statements in the execution of processes in the absence of a certification inter-
XBRL format. mediary, putting at risk the existence of all those professions
In this regard, it is worth pointing out by the Auditing and such as notaries, lawyers, auditors and accountants, who have
Assurance Standards Board (IASSB – an international body always dealt, at different levels, with certify data and information.
responsible for ruling the principles and rules of the revision), in The spread and impact of blockchain are growing together with
the document entitled IAASB Staff questions and answers – the increase in the volume of data produced every day. How-
XBRL: The emerging landscape (IAASB, 2010), that the auditor ever, according to Gartner and Deloitte (well-known research
is not required to implement verification procedures on the and advisory companies) (Furlonger , 2017; Rithu, Preetha
conversion of the financial statements in XBRL format. A role 2018), it will be necessary to wait until at least till 2025 to witness
cannot be assigned to the auditor with reference to the new the emergence of its most disruptive and highly transformative
discipline concerning the XBRL format also in consideration of effects. At the moment, we find ourselves in what has been
the fact that the XBRL format is not included in the other identified as the first phase of experimentation and use of
information required by the auditor according to the ISA 720 technology.
international audit principle. Therefore, the auditor is not re- The main application of the Distributed Ledger (Yu et al.,
quired to assess any inconsistencies between the financial 2018; Shyshkova, 2018), above all by leveraging the peculia-
statements on which he has made a judgment and the one rities of smart contracts, is the reconciliation of the adminis-
submitted in the XBRL format. The foregoing does not exclude, trative documents of the companies in a decentralized manner,
however, that the company may instruct the auditor to perform thus delegating this activity to the decentralized consent of the
these audits, but the same would not be included in the task of Blockchain. Essentially three-way reconciliation (like a recon-
revision. It would be just the subject of a separate remark. In this ciliation that involves three documents such as orders, transport
case, the engagement letter and the letter of attestation should documents, and invoices), as well as two-way reconciliations
explicitly contain the identification of this additional task (like a reconciliation that involves two documents such as orders
compared to the ordinary audit (Abdolmohammadi et al., 2017; and invoices), could be performed inside the Blockchain. There-
Hoitash, Hoitash, 2017; Mao, Zhang, 2017). fore, it would no longer be necessary to issue the documents
Since it is a standardized language, XBRL provides a effi- (they are already produced in the system and therefore
cient and consistent system to define the data model of an accessible by the parties), to store them (because already
application for analyzing financial documents. This is useful for stored in the system), and to show them (they are accessible by
the application of standard methodologies, such as: historical anyone authorized and therefore distributable). Since the
analysis of financial statements through the reclassification of Blockchain technology can be also be applied to electronic
the statements and the analysis of the financial statement indi- invoicing, it has the potential to transform the process of
ces; and, prospective analysis through the preparation of pro- validation of transactions, and the way invoices issued and
forma financial statements. payments are made. Combining decentralization and electronic
A compliant with the specifications XBRL taxonomy provides bills, the system will benefit from a tamper-proof and transparent
an effective environment for defining: the data dictionary of the structure, also minimizing the risk of human error and frauds
elements used by financial models as input variables, and the (Fischer, 2018; Hambiralovic, and Karlsson, 2018). Each record
layout and logic of calculation of the reclassified statements. or block, linked and secured using cryptography, is also visible
XBRL can be used as an input data format, which feeds analysis to all parties, therefore removing the need for an intermediary
modules, or as an output format, which allows the export of data (Dwyer, 2017; Hays, 2018; Mishra, 2018).
processed by the model. For example, we can export a forecast
income statement to accounting software that has additional 4.4. Benefits of artificial intelligence in applying
modules for planning and budgets, or produce a financial sta- knowledge management on XBRL and Blockchain
tement to be published on a web portal for reporting to senior for business accuracy
management. The extensibility of XBRL data models, both in
taxonomies and in instances, offers very powerful functionalities It is evident and inevitable that the future of accounting
in this context (Erzegovesi, Bonetti, 2007). practices will be characterized, developed and determined by
the combination of XBRL language, artificial intelligence,
4.3. Blockchain and accounting bookkeeping Blockchain technology as an expression of the triple entry
bookkeeping system and electronic invoicing. Knowledge
The distinctiveness of the Blockchain consists in the management related to accounting reflects the needs of the
absence of an intermediary entity that must guarantee the historical context, but above all, through the use of new
truthfulness of the data. This task, in fact, is performed by technologies and the intellectual combination of information

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 INFORMATION SECURITY MANAGEMENT
technology and accounting, it manages to solve long-standing The convergence towards the integrated use of new digital
challenges. Some problems, such as the reliability of the technologies is now an inescapable process. There are too
information indicated and the lack of cross-comparison, have many advantages and opportunities arising from the integrated
always existed, others have arisen recently, such as those use of all these advanced tools. The challenges that accounting
related to globalization, the need for standardization, is facing in the contemporary world are mainly determined by
comparability, rapidity of registration (due to the immense globalization, which exponentially increases competitiveness in
amount of data to be recorded) and, last but not least, the big every sector, and the lack of trust, due to the depersonalization
data analysis. of every relationship.

Figure 1. Digital Future of Accounting Knowledge Management

The Figure 1 displays a comprehensive representation of all capture cross border financial data and other information that
the challenges that accounting knowledge management is fa- could assist international and national institutions (Moshirian,
cing in the digital era. As can be easily observed, reasoning on 2011), to measure and manage financial risk more effectively,
the opportunities and advantages offered by each technology, and to prepare for challenges raised by new financial tech-
each tool, integrated with the others, will provide a complete nologies. Only an internationally integrated financial system will
shield against all these problems, providing an immediate and make large banks global.
effective solution. FinTech has revolutionized the entire financial services
Positive answers to challenges are often found through the industry by using innovative and advanced technologies such as
combination of different technologies (for example, the reduction Blockchain, cryptocurrencies, XBRL, Artificial Intelligence and
of human error can occur with the use, at the same time, of robot-advisors. These innovative financial technologies come to
electronic invoicing, Accounting Information Systems (Zaki et realign and reboost the efficiency and quality of financial
al., 2019), Artificial Intelligence, and Blockchain), in other cases services by cutting the human errors and time processing.
a single digital tool can solve problems that afflicted the accoun- Central banks are the lead authority for macro prudential
ting system since its creation (for example, the Blockchain policy in most jurisdictions. Macro prudential responsibilities are
solves the problem of reliability and trust as an expression of the more likely to be given to the central bank when the central bank
triple entry bookkeeping system). is also the micro prudential supervisor for banking and financial
institutions. Dedicated committees are also responsible for
4.5. Necessity of new approach of Management macro prudential policy in a number of jurisdictions and typically
and Supervision of Financial Institutions include government representatives, central bankers and super-
and Services visory officials. More generally, most jurisdictions have strength-
ened their frameworks for monitoring financial stability (Calvo et
The global financial and economic crisis has done a lot of al., 2018), typically by setting up public authorities.
harm to public trust and confidence in governing and financial The involvement of central banks is a key feature of any
institutions, as well as the principles and the concept itself of the financial supervisory architecture. This is also a source of
market economy. It has also eroded a lot of public trust in synergies and conflicts of interest. Synergies stem from the links
corporations. The climate of global financial uneasiness can between financial and economic stability and from the connec-
partly be attributed to the global meltdown of 2008 where tion between monitoring the overall liquidity of the system – the
governments and other regulatory agents failed in their res- role of central banks – and the oversight of financial system
ponsibility to monitor and steer unrestrained speculative and solvency, which is the role of the prudential supervisory function.
damaging financial activities (Scardovi, 2017). Financial crises On the other hand, conflicts of interest may emerge as monetary
often lead to the emergence of new national and international policy decisions concerning the setting of interest rates can
institutions. Financial digitalization lead to new responsibilities of affect banks’ profitability and solvency. The assignment of pru-
financial supervisor. The recent global financial crisis has pro- dential responsibilities to the central bank also raises concerns
vided a unique opportunity to go beyond economic data and to of a political economy nature including reputational risk and

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